As a part of the continuing reforms, the Centre made paradigm shifts in the way farmers will be able to market their produce and cultivate their land through two ordinances passed on 5 June 2020, in addition to making changes in the 65-year-old Essential Commodities Act, 1955. The Farmer’s Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, will enable traders and farmers to enjoy freedom of choice in regard to procurement and sales across the country, which facilitates discovery of the most remunerative prices.
By demolishing the barriers erected by age-old agriculture produce marketing acts of different states that put farmers in a straitjacket, forcing them to sell their produce in the nearest agriculture markets, these ordinances provide a new deal to farmers. They can sell their produce anywhere to anybody at any time of their choice. The state laws on agriculture produce marketing created a new class of traders who, in collusion with the elected representatives of the local marketing boards, created probably the worst environment for farmers to sell their produce at remunerative prices, though the acts were intended to help them. The mandis collected fees on the sale of the produce ostensibly to be paid by the purchaser, but through backward shifting, the burden was cast on the prices paid to the farmer who ultimately bore it. The mandi presidents and members became powerful forces to reckon with.
This was the picture in Madhya Pradesh, which the author is familiar with. At one time, the marketing federation even lent money to the state. All this could have been that of the farmer but for the phenomenon of regulated markets for agriculture produce. This could not be any different in other states.
This ordinance will override all state agriculture produce market laws. It allows farmers to sell produce in any market they find most attractive. Farmer produce includes all items of crops produced by a grower. The ordinance also provides security of payments to the farmer. The trade can be conducted anywhere. There is also a dispute settlement mechanism for any trade dispute between the farmer and the trader.
It liberates the farmer from all restrictions in regards to the sale of all his produce. Most farmers now have access to market information through their cell phones and it is hoped that they will be able to get remunerative prices for what they sell. The Tamil Nadu government has followed suit with its own ordinance to allow farmers to enjoy the freedom. I would suggest another improvement in this context. Farmers should be given temporary loans to pay a part of their crop loans and hold stocks till they get the best price. The second ordinance is The Farmer’s (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, to "provide a national framework on farming agreements that protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed, remunerative price framework in a fair and transparent manner and for matters connected therewith or incidental thereto”.
The ordinance provides for model contracts and also for registration of all such agreements. This will enable large firms to enter into agreements with small farmers whose farm sizes are uneconomical and help them with farm services. It would have been ideal if there had been a provision for entering into a collective agreement with a number of small farmers in a contiguous area so that production becomes economical and mutually advantageous. Many states have framed laws to allow contract farming and there are many success stories in India in several states, including Tamil Nadu.
The third ordinance, The Essential Commodities (Amendment) Ordinance, 2020, is intended to increase the competitiveness in the agriculture sector and enhance the incomes of farmers. In one stroke of the pen, Section 3 of the Essential Commodities Act that had the powers of regulation is now restricted to be used only in case of war, famine, extraordinary price rise and natural calamity of a grave order. There has to be a 100% rise in the price of horticultural produce and a 50% rise in the case of non-perishable agricultural products to impose any restrictions under the Act.
The Pradhan Mantri Fasal Bima Yojana, 2016, provides crop insurance for crop failures. Two other schemes benefitting the farmer are the Pradhan Mantri Kisan Samman Nidhi Yojana and the Pradhan Mantri Kisan Pension Yojana. The former puts Rs 6,000 per annum into the bank account of every farmer and the latter gives a pension of Rs 3,000 per month to small and marginal farmers on a nominal contribution by them. Many other crop improvement schemes involving subsidies by the Central and state governments are being implemented for improving productivity and income of farmers.
Farmers also have to bring about a change in the way they bequeath their land to their successors. If they continue to subdivide them amongst their children, then the day is not far off when pauperisation will become the order of the day amongst the subsistence farmers of India as smaller holdings will become totally unviable to cultivate. Alongside these, the focus should be on increasing productivity in all crops sown by the farmer. We are far behind a country like China where productivity levels are very high, but there is no reason why India cannot reach those levels as farm sizes are not any bigger in China.
It is time the government determines the economic size of a holding under different crops and under different soil and climatic conditions in every state and not allow the registration of smaller parcels of agricultural land below that.
M R SIVARAMAN
Former Revenue Secretary and ex-Executive Director, IMF
(Email address: madras.sivaraman@gmail.com)